What is going on with pig prices? TVC's Phil Woodall has his say
12th Jun 2019 / By Alistair Driver
Pork processors have failed to achieve the necessary price increases from retailers to increase producer prices, according to Thames Valley Cambac's general manager Phil Woodall.
In an interview with Pig World, he described the current situation, where UK prices are failing to keep pace with huge increases across the EU as ‘extremely frustrating’.
“For producers it is even more annoying because they have endured nine consecutive months of losses due to poor physical performance, which is as a consequence of health challenges coupled with high feed prices and a below the cost of production pig price," he said.
He went to summarise the various factors he believes are holding back UK prices. Tight supplies at home and in the EU and more expensive imports as EU prices rise should be supporting higher prices, while the UK should be benefiting from increased demand from China.
However, one of the key issues for the UK is the number of processing plants that are either not approved for export to China or only partially approved, he added.
Mr Woodall (pictured with Hugh Crabtree and Zoe Davies at last year's Pig and Poultry Fair) said: “The difference in value the processor can return if they have the full approval for export to China is significant circa £5-£6 per pig and that’s growing. Additional facilities obtaining approval has been very slow up until recently and given the shortage of product in China, the authorities have accelerated the process of approval and providing processors have completed the documentation correctly over the last couple of weeks, we should see many more UK single specie plants approved.”
He added that the industry has ‘failed’ when it comes to domestic consumption for pig meat products, which is declining
But he said the wholesale, and to a lesser extent foodservice have been pushed to pay more for pork, partly due to the higher cost of imported products, and have done so, 'mainly down to the fact if they didn’t they went without product'.
But the real issue lies in the failure to get the price increases out of retailers, the pig sectors' biggest customers. "Trying to obtain increases from this sector is extremely difficult and processors struggle with finding the balance between extracting price increases and avoiding the threat of swathes of business being retendered which generally results in margin erosion for the processor and as such, they will do all they can to avoid these scenarios.”
Mr Woodall said he has no doubt that the retailers are fully aware of what’s required, as retailers have felt the full brunt of the EU price increases.
“My conclusion is that processors have not been holding back passing price increases obtained on as I don’t believe they have obtained sufficient increases from retail yet,” Mr Woodall said. “But I do believe this is where processors have failed the supply chain by not extracting from retail appropriate increases, which we accept is difficult for all the reasons stated but it is absolutely necessary and processors need now to deliver.”
Mr Woodall also gave his views on the SPP and how prices are set and reported. He warned that having more transparency in pricing inevitably moves towards cost plus pricing, which would not be conducive for independent producers.
“The conclusion for me is about having a relationship between processor and supplier that understands the needs of each other, but a pricing tool that can react to the market through agreement. If at any point agreement can’t be reached then there is a mechanism to go to which drives a behaviour for the parties to agree.”
You can read the full article here